Tuesday, October 14, 2008

I started reading Paul Krugman's blog last year, among several others, when I started following the implosion of the housing bubble. His columns are unavoidable if you read the NYT, but his blog is so much better than the simplistic polemics about politics he writes for print. Now, he's won a Nobel. It's interesting when a blogger you read wins a Nobel!

It appears that a lot of the lenders have lost huge amounts of money since defaults are much higher than Prosper.com advertises. See this and this; within six months of opening, more than 30% of loans were delinquent. Delinquincies and defaults are probably 15-20%.

One problem seems to be that prosper.com doesn't have incentive to aggressively pursue delinquincies; in order to sue delinquent borrowers, the company has to buy back the loan and assume the credit risk, whereas otherwise lenders have all the credit risk.

If collections are as pitiful as some post, defrauding Prosper.com lenders must be relatively lucrative and risk-free. If a grifter already has bad credit already, what would they lose from taking out a Prosper.com loan for $20,000, never paying on it, and sending a PFD letter to the collection agency a few years later?

Browsing through the list of borrowers asking for loans, there are lots and lots of people who are sitting under huge debt loads that are turning to Prosper as a lender of last resort, or have a brief credit history of maxing out credit cards whenever they want to buy something. There are relatively fewer borrowers who have established themselves as responsible users of credit at all, or have ample income to meet their obligations.

Another problem is that none of the borrowers have been there long enough to develop social capital, while ordinary lenders do not have sufficient experience or skills to adequately price risk. It looks like many iffy loans are filled by newbie lenders bidding through portfolio plans.

A number of disgruntled lenders are skeptical that the company Prosper.com will even survive the three-year term of its first loans.

Wednesday, May 28, 2008

After graduating college in spring, I moved to Japan in September 1998. Over the summer, I had signed up as an English teacher with a company called NOVA, which had schools in front of train stations across Japan, after driving to New York for a job interview.

NOVA was the largest private English school in Japan, and they shipped over planeloads of teachers from across the world every year. They were the only company I knew of to sponsor a visa and arrange lodging for their teachers, although the other big schools, like AEON and GEOS had many teachers and probably helped facilitate this somehow. You needed a college degree and to be a native speaker to qualify for the job, so the requirements for English teaching in Asia were much lower than Europe (where certification or a year of experience were necessary). One woman I met there was a Briton who wanted to teach English in Spain, but came to Japan to get the year of experience first. You can go on a tourist visa to look for a job there, too, but you have to find a visa sponsor, and you can't convert a tourist visa to a work visa in country: you have to fly abroad (usually Korea) to get the visa changed at an overseas embassy.

My school was a private school; I taught eight classes a day of varying students. My students ranged from teenagers in high school, to engineers looking to improve their skills at international conferences, to housewives and more elderly folks studying English as a hobby or for travel. Often in the same class. JET is another program many people take to teach in Japan, but it is set up quite differently.

NOVA was viewed as an entry-level job among many teachers there; because they sponsored your work visa, which was good for a year unless the sponsor actively cancelled it, I heard plenty of rumors about teachers signing up with NOVA to leave several months later for a more remunerative job in the country.

I understand that NOVA is no more. The company went bankrupt last year, apparently after some shenanigans by the CFO. One of my sister's friends was working for them at the time. He said that one of their paychecks came late, and the next one didn't come at all, and he stopped going to classes after they missed that one. The company was out of business shortly after that.

Japan pays a lot more for teachers than most other places in Asia, I would guess. Salaries are very roughly comparable to urban American ones, or somewhat more (also depending on currency fluctuations). I was curious about going to teach English in China a few years ago, but I reckon going to teach English in China is a little more work. The companies and institutions that advertise abroad mostly seem to pay something like $5,000/year, but I've heard that looking for teaching programs while in China may yield a more lucrative job. But Japan is orders of scale more developed and expensive than most of Asia; it's more like England or Austria in cost of living and quality of life.

Fun times. I left in 2000, and have only been back once to visit, a few years ago. Some of the other people in the Japanese language live group have had some experience living and teaching abroad in Japan and elsewhere, as well.